Have you ever struggled to pay a credit card bill if the due date is around the last day of the month? This, typically, happens when one is short of funds in the final days of the month, as the next month’s salary is awaited. Currently, the due date is fixed at the time of issuance of the card and to date there has been no flexibility or option for the cardholder to fix the due date. Now, cardholders will have the option to set their payment due date.
For the benefit of cardholders, RBI has asked card issuers to allow cardholders an option to choose any date as the starting or closing day of the billing cycle at least once. Credit card bills typically have a 10-15 day repayment period or the payment due date from the billing cycle date. So, if one sets the bill generating date as 1st or 2nd of the month, the due date will be between 10 and 15th of the month.
The good news is this option to set one’s billing cycle and thereby the due date will be available to both new and existing cardholders.
”Both the new and existing cardholders can change the date of the billing cycle more than once. The card holders can now set the billing cycle in a way that suits their cash flow and multiple card holders can also align their due dates to manage their finances better. This would help the card holders manage their finances,” says Moin Ladha, Partner at Khaitan & Co.
Cardholders should set their billing cycle in such a way that their bank account has sufficient cash to not only meet card outstanding amount but also to meet other household expenses during the month. In doing so, cardholders can save on penalty and interest charges on the card spends.
The RBI has introduced another rule allowing cardholders to choose their preferred card network, which will soon be available to the cardholders.
There are several popular and authorised card networks in India such as Visa, MasterCard, RuPay, Diners Club International and American Express. Till now, the option to select the card network was not available to cardholders.
Going forward, card issuers will provide an option to their potential cardholders to choose from multiple card networks at the time of issue. For existing cardholders, this option may be provided at the time of the next renewal. “Card Issuers (banks/ non-banks) must provide an option to their eligible customers to choose from multiple card networks at the time of issue,” says Ladha.
However, there will be an exception with American Express cards. The card issuers who issue credit cards on their own authorised card network have been excluded from this new rule. “This means that this new rule will not apply to card issuers like American Express who issue cards on their own authorized network. Accordingly, such card issuers will neither be required to issue a card of any other network,” adds Ladha.
Spending on a credit card is a kind of debt, a loan that the credit card issuer provides to the cardholder. If the outstanding amount is not repaid fully on the card due date, an interest gets charged on the unpaid amount.
RBI has instructed card-issuers to inform the cardholders of the implications of paying only ‘the minimum amount due’. A legend/warning to the effect that “Making only the minimum payment every month would result in the repayment stretching over months/years with consequential compounded interest payment on your outstanding balance” needs to be prominently displayed in all the billing statements to caution the cardholders about the pitfalls in paying only the minimum amount due. The Most Important Terms and Conditions (MITC) should also specifically explain that the ‘interest-free credit period’ is suspended if any balance of the previous month’s bill is outstanding.